Working Paper Series, University of Zurich, Department of Economics 83 [rev.]

Abstract:

Extreme-right-wing (ERW) parties are on the rise in many countries. Moreover, there is an alarmingly high cross-country correlation between the election success of ERW parties and immigration. Motivated by this evidence, we explore one potentially important channel through which immigration may drive support for ERW parties: the presence of immigrants in the voters' neighborhoods. We study the case of the Freedom Party of Austria (FPÖ). Under the leadership of Jörg Haider, this party increased its share of votes from less than 5 percent in the early 1980s to 27 percent by the year 1999. We exploit specific features of the history of immigration into Austria to identify a causal effect of immigration on ERW voting results. We argue that the sudden, large inflow of immigrant workers in the 1960s generated immigrant settlement patterns that provide a plausible source of exogenous variation in the more recent spatial distribution of immigrants. We find that the percentage immigrants in a community is an important causal factor behind support for the extreme right, explaining roughly a quarter of the cross-community variance in votes for the FPÖ. The effect varies across immigrants (e.g., based on their skill levels) as well as across communities (e.g., based on the degree of skill overlap between immigrants and natives), supporting the idea that voters worry about labor market competition. We find more limited indications that compositional amenities play a role for ERW votes.